U.S. employers' health-care costs rose just 7.5% in 2004, a rate much lower than analysts had predicted. The costs are likely to slow even more next year to an estimated 6.6%, according to a nationwide survey. The increase is the smallest in five years after several years of double-digit increases.

Two factors are contributing to this unexpected slow in costs: more costs shifted to employees, and smaller premium increases by health insurers. Not-for-profit insurers are driving the cost reductions; as they try to lower the amount of profit they have reserved, they are creating competition within the industry.

Even with the lower percentage increase, overall costs are still great, with the average cost of health care per employee rising from last year's $6,215 to $6,679. Many companies responded to the astronomic cost increases in 2003 by raising employee premiums and co-payment amounts. These changes have had the effect of decreased employee spending for medical services. These savings are short-lived, however, consisting mainly of switches to generic drugs and forgoing visits to specialists. Other employers are benefiting from implementing disease-management programs that teach preventative health measures to employees who suffer from chronic diseases such as diabetes and heart disease. Consumer-directed plans with high deductibles and tax-saving plans are expected to grow in popularity with an estimated 26% of large employers offering them by 2006.